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' . : . : : - ; ' ' , ; - , : '' ., 1,,";' ' ',, ,, ' ' ,. , i, .!: ,.;,

ff.ir g;tl'ffii* iil]fifl:;lffii* 'ts'ff*r *ffi'#g#tff'm#"$$qf,#ni g*ffiffi rugp;ffiffi,|it;tti,

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',,lr ll rir:i i,.:i r'lir :i;' I i:il i. i r i'i ii i l,i,iR. S, Rosenbloom

i:.rr lv in November 1970, Henry Kloss was reviewing'ri progress Aclvent Corporation had made in the pre-

- - 'Jins months. The Scptcmber prol' i t and loss state-.'nt had rcgistered a net profit of almost $30,000,

- . r inst a cumulat ive loss of nearly $165,000 in the-';cding | 0 months. The new Advent cassette

--(rrder, Model M200, had just completed its thirdlth on the market. The M200 recorder, with its so-

':.ricated circuitry, was felt to represent real poten--. rs a rcplacemenl for the phonograph as the central-::cnt in any home entertainment systelx. With the-.,:rcial turnaround, Mr. Kloss f-elt conf ident that a.' lcvcl of $40 million to XB50 million was achiev-

' . bv Advent within five years. His problem was

:1) or 'ganize for cont inuing innovat ion.TI iTRODUGTION

rloss was a well-known ligure in consumer elec-- product design and manufacturing. Prior to Ad-

. . re hadparticipatedinthefoundingandoperation-.

- r-rstic Research, Inc. (AR), and later, KLH Cor-" .: ,-)u. He had been the mind behind the products at

O 1973 by The President and Fellows of Harvard College.ieserved. Harvard Business School Case 9-614-021.

KLH, an organization which was renowned for itsvery high quality, slightly oddball electronic products.He lelt KLH in 1961 after 10 years as president.

The formation of AR had originated during the Ko-rean crisis. While stationed in New Jersey, Mr. Klosswas able to attend the City College of NewYork, wherehe was a student of Edgar Vilchur. He and Vilchur hadmutnal interests in an acoustic suspension speaker be-cause of its immense reproductive advantages overconventional mechanical speaker systems and its smallsize. With Mr. Kloss providing some capital and a"garage," Acoustic Research, Inc., was formed. Finan-cial guidance of the business was provided by Anton(Tony) Hof-mann, who was later to become a principalof KLH, and then treasurer of Advent.

Mr. Kloss and other active management sold theirshare of AR, Inc., after irreparable disagreements withVilchur over company policies. KLH was initiatedshortly thereafter with $60,000 in capital and Mr.Kloss as president, Malcolm Low as manager of sales,and Mr. Hofmann as financial manager. After sevenyears and a series of innovative audio products thatwere producing a $4 million level of sales, KLH wassold because of sheer tiredness of the managers anduncertainties associated with KLH's growing size.With the sale, Mr. Kloss agreed to remain as presidentfor three years, and he left in 1961.

Advent Corporation was incorporated by Mr. Klossin May 1961 for the purpose of manufacturing spe-cialized electronic products for home entertainmentuse. The actual justification for forming the company

49

5O pnnr rwo: DESTGN AND EVoLUTToN oF TECHNolocy sTRATEGy

was to do work in television, especially to create an or-ganization which would support the R&D and mar-keting of a large screen (4' x 6') color television sys-tem. Formal development work on the televisionsystem had been suspended in 1970.

With the formation of Advent Corporation, Mr.Kloss embarked on a plan to see what a big companycould do. He felt that growth was always a primarygoal, always desirable, but that one had to think interms of what was realizable without beating one'shead against the wall. Mr. Kloss sought to retainstrong financial control of the company, having soldhis share of Acoustic Research. Inc.. under duress andhis share of KLH Corporation with mixed feelings. Hehad this to say to the case researchers about financialpolicies:

The size one desires is really only limited by the dollarsavailable for working capital. There's a firm intention toreach the middle tens of millions of dollars certair.rly in Iessthan frve years; one anticipates a faster accumulation ofstaff, faster than the 30 percent one might be able to do liomprofits, so the question becomes how fast does one dribbleout equity if you're not staff limited?

Mr, Kloss continued:Eighteen months ago, there was a small private ofl'ering of12 percent of the company in which we ofl'ered 20 units con-sisting of $10,000 in 8 percent convertible debentures, and300 shares of equity comlnon at $7.50 per share, l0 centspar value. I retained 75 percent control; company directorsand others have 13 percent. It was simply that circumstanceswarranted our doing that. In addition, we have a $ 1 . 15 mil-lion line of credit, of which $600,000 is revolving and$550,000 open, secured by the directors and pegged to 80percent of the accounts receivable. I will not ofl'er any fur-ther equity until a really big push (for which the sales areguaranteed) requires it, and when a price several times the$7.50 price per share is attainable. Beyond that, we areworking hard to slash overhead and to build profits.

Financial data regarding the operations of AdventCorporation are given in Exhibits 1 and 2.

CURRENT OPERATIONS

In the fall of 1910, Advent Corporation manufacturedand sold five products for home entertainment use: theAdvent loudspeaker; the Advent Frequency BalanceControl, which allowed the listener to alter the relativemusical balance in any audible octave; two models ofthe Advent Noise Reduction Unit, which allowed vir-tually hiss-fiee tape recording and playback; and the

new Advent Tape Deck, which also featured noise-freerecording and playback. These products, as well as aspecial recording tape that Advent sold under licensefrom Du Pont, are described in detail in Exhibit 3, in apiece of Advent promotional literature.

Several specific policies of Advent Corporationserved to interlock the company with the consumerelectronics market. Most important, perhaps, was prod-uct policy. Mr. Kloss felt that there were several repug-nant aspects to direct competition with the industry gi-ants such as Zenith, Magnavox, and Motorola. Adventsought to turn to specialized areas of the audio market,the 5 percent or so where no competition existed, wherewhole new classes of products might be developed.Quality was an important Advent byword: to make themost efficient piece of equipment at the lowest possibleprice to the consumer was the primary objective. Suchproduct sanctity was not protected by patent but ratherby the product itself, which had a real name, whichgathered equity as it was seen and became known, andwhich hopefully represented the perfect low-price prod-uct. Even though the entry fee was low, Advent antici-pated specializing upon a base product already deter-mined by the major suppliers (e.g., tape decks), whichhad an appeal to a broad spectrum of the market.

Production operations of Advent Corporation wereclosely supervised by Mr. Kloss, although there was aproduction manager for all but the M200 line. Speakerswere manufactured in a separate 12,000-square-footplant in Cambridge, Massachusetts. Major operations ofthe company took place in a 20,000-square-foot, three-story building also in Cambridge, which Mr. Klossleased upon forming the company. A move was beingplanned to consolidate the operations of the company inthe spring of l91l into a 64,000-square-foot buildingalso in Cambridge, which had already been leased.

Production itself was typical of the small manufac-turers in the industry. Approximately 130 productionworkers formed the products in a specified sequenceof assembly steps that was usually determined by Mr.Kloss. He also carried out "time and motion" studiesto determine an appropriate production rate. No sig-nificant economies of scale existed in the industry. Mr.Kloss felt very strongly that higher overhead woulddestroy any advantages to be gained by mechaniza-tion. In addition, it seemed that after a quantity orderof 100 per week more, no important savings could begained from higher quantity parts orders. It had beenfound that direct labor ran about one half of materialcost over a wide range of products. With manufactur-ing overhead being determined as a percent of direct

DIS:TINCTIVE TECH'NSLOGiICAL OOM,PETENCES AND CAPABI]LITIES 5l

EXHIBIT t

Current assets:CashAccounts receivable

Less: Reserve for bad debtsAdvance to employeesInventory:

MaterialLaborManufacturing overhead

Prepaid insurance and other assetsTotal current assets

Property, plant, and equipmentLess: Accumulated depreciation

Deferred financing expenseAdvent television systemTotal assets

Curent liabillties:Accounts payableNoles payable, bankDue otficersLoans,.otherAerued debenture interbstAccrued payrollRoyalties payableAocrued royalty expenseAocrued audit and legal feesAocrued taxes and fringe benefitsAocrued promotion and discount allowancesMiscellaneous accounts

Total current liabilitiesl-ong-term debt: ?

896 convertible debenturesSbd

52 pnnr rwo: DESTGN AND EVoLUTToN oF TEcHNoLocy STRATEGY

EXlilBrr 2

Advent Corporation (C)Statement of Profit and Loss

As of September 26,197O

Current Month

Units AmountNovember 1 ,1969,

to Date Amount

Gross sales:Regular speakersUtility speakersFB.C.M 1 0 0M 1 0 1M 101 AdvocateM200

wc-1PartsCrolyn tape

TotalLess: Provision for promotional and quantity discounts

Net salesCost of sales:

MaterialLaborManufacluring overheadRoyalties

Total cost of salesGross ProfitOperating expenses:

SalesGeneral and administrativeResearch and development

Total operaiing expensesOperating prof it (loss)Other income (expense)Capital izat ion of AdventTV system (included in R&D above)Net proJit

1 , 5 6 1278t 3 l

JUJ

295146988

61 3 8

1,824

$115,222.4417,838.5823,148.3450,481.8324,139.5011,826.00

170,718.00100.02

1 ,603.1 2605.00

3,997.44

$ 685,003.1046,653.19

182,995.73260,995.63

68,485.2513,284.O0

245,960.30363.40

3,371 .032,757.16

1 1 , 1 0 8 . 2 0

1,520,976.9986,385.59

1,434,591.40

663,770.47199,930.01232,392.33

13,222.26

1 ,1 09,31 4.67325,276.73

242,799.7891,570.51

195,877.20

530,247.49(204,970.76)

(34 ,652.11)75,085.92

419,680.2721 ,489.78

398,190.49

196,431 .8241,366.2545,908.85

3,182.88

286,889.801 1 1 , 3 0 0 . 6 9

47,517.13i E 7 t r Q A Q

14,371.13

75,641 .94

(6,428.79)

(100%)

(72%)(28%)

(1e.0%)(e.0%)

( -1 .6%)

$ 29,229.96 $ (164,536.95)

service Advent products intensively. Shelf space wasoriginally attained by contacting each dealer personallyand promising a succession of useful and high-qualityproducts, with which it would be valuable for the dealerto be associated. The reputation of Mr. Kloss was alsoemphasized. Finally, exposure to the trade press and tothe public had been attained through press conferencesdesigned to place the Advent audio products in sink-or-swim competition with similar offerings then on themarket. Response had been overwhelmingly favorable.

Under pressure to reach the marketplace with suc-cessful products and to improve profitability, Advent

had expanded on a day-to-day functional basis. Empha-sis on "continually optimizing its position" rather thanresponding to a long-range plan had placed substantialimportance upon production effrciency and rapid re-sponse to daily marketing problems. As a result, culrentoperating managers were expected to monitor the func-tions of their departments in fine detail.

INNOVATION AT ADVENTBoth Acoustic Research and KLH had demonstratedthe ability to recognize changing product and con-

DISTINCTIVE TECHNOLOGICAL COMPETENCES AND CAPABILITIES 53

EXHIBIT 3

ii{ li n: ltr r:r tl "i,fil l;,irr ., ;ir l'* l.I {"i j, li rl'lr li' !!rii ftrr i ::: l':i+After more than a year in business, we (Advent Corporation)think i t 's t ime for an accounting of where we are and wny"

We began, you may remember, with the inlention of makingproducts that would dif fer signif icani ly from other people's-products that would f i l l special needs others weren,t f i l l ing, ex-plore genuinely new ways of doing things, and keep test ing ac-cepted l imits of performance and value..

One of the products we had in mind was a new kind of colortelevision set, a high-performance system with a screen sizeseveral t imes the present l imit for home use. We are happy toreport that i t 's coming along nicely (and slowly, as such thingsdo), and that the present prospects for prerecprded video ma-terial make i t look more appealing than ever.

Audio, however, was where we could do the most the ouick-est, and our f irst product was:

THE ADVENT LOUDSPEAKERAnybody who knew us might have predicted that we woutomake a loudspeaker system pretty early in the game, but fewwould have predicted that we'd make just one, call it simply TheAdvent Loudspeaker, and say flatly that it was the best wecould offer for a long way into the future.

The reason for that was, and is, that it had become possibleto design a speaker system as good as anyone wouto everneed for home l istening-one as good in every measurable andaudibly useful way as any speaker system of any size orprice-at a cost sl ightly below what most people consider themedium price" category. Our prior experience in design and

r-nanufacturing techniques convinced us that this coujd beCone, and we did i t .

We will be happy to send you full particulars on The Advent-oudspeaker, including i ts revrews. But we bel ieve i ts sound wil l:el l you quickly enough why i t has become, in j ts f i rst year, one3f our industry's al l- trme best sel lers.

(To avoid surprises in a showroom, we should note that our:ne speaker system comes in two styles of cabinet: the origi-^al walnut model, priced at 9125r, and a "ut i l i ty,,version that is?ctual ly in a rather handsome vinyl f inish that looks l ike walnut,: ' rced at $105.1 Both sound the same.)

All of the f irst yeals reviews of The Advent Loudspeaker f in-sred by saying that i t was an auspicious beginning for a com-:any. But i t represented only one of our immediate direct ions.-1e

next was:

'-av ng helped found two successful companies previously, and

-. . ' ing pr ior credi t for some o{ audio 's most s igni f icant products- : uding something l ike hal f of the loudspeakers in use in music

:, siems and serious radios and phonographs in this country), our: ' :s ident , Henry Kloss, had some pret ty t i rm not ions aboul what he

:- ted to do now.'S ghtly lower in some parts of the country.

THE ADVENT FREQUENCY BALANCE CONTROLOne of the things to be learned in the design of speaker sysremsis that "f lat" f requency response is in the ear of the beholder andvirtual ly nowhere else. True, there are amplj f iers and tuners withstraight-line f requency response, but practically everythingelse-recordings, ltstening rooms, cartridges, loudspeakers-isanything but flat. Different things sound different, not because ofbasic dif ferences in qual i ty or performance in many insrances,but because a recording engineer, or speaker designer, or roomplasterer had a sl ightly special view of the world"

There is nothing wrong with those dif ferences, in our vrew.And one of the chal lenges for a speaker designer is to accepland cope with them by designing for an octave-to-octave musi-cal balance that sounds "r ight" with the wildest variety of pres-ent recording techniques. But there is no single perfect bal-ance, and that lack is a source of discomfort to a number ofcri t ical l isteners. l t causes many l isteners with real ly superb(and real ly expensive) sound equipment to keep trading for newand more expensive equipment in the hope that i t wi l l sound"perfect" for everything from Deutsche Grammophon,s concep-t ion of the Berl in Phi lharmonic's sound to Columbia,s notionsabout Blood, Sweat, and Tears.

Anyone who keeps pursuing thal ideal, and many wnodon't, would be well advised to investigate our Frequency Bal-ance Control, a unique device that enables l isteners to alter therelat ive musical balance of any octave in the audible f requencyspectrum. l t is uniquely f lexible and uniquely effect ive rn deal-ing with sonic dif ferences between recordings, equipment, andeven the placement of speakers in a room-and in makingthings sound subjectively "r ight" more consistenl ly than couldbe accomplished any other way.

The FBC, designed around our own experience with sub-jective judging of sound quality, is worth investigation by any-one who can't just si t back and l isten, accepting the bad withthe wonderful. At $225+, i t is a far better, more pert inent invest-ment than most changes of components.

One of the special abilities of the FBC is the reclaiming ofmany recordings from an unlistenable state.The need for anotherkind of recording reclamation led to another kind of producr.THE ADVENT NOISE REDUCTION UNITS (MODELS 1OO AND 101)Background noise in tape recording-specifically, tape hiss-isa far bigger enemy of sound quali ty than most i isteners real ize.One reason i t isn't properly identi f ied (and vi l i f ied) is that fewpeople have heard tape recordings without i t . Lacking the slan-dard of blessed si lence is something l ike never having seen atelevision picture without "snow." l f you don't know it isn't sup-posed to be there, you just look or l isten past i t and accept i t aspart of the medium. But once you see-or hear-things free ofinterference. life is different

rSlightly higher jn some parts of the country

54 DESIGN AND EVOLUTION OF TECHNOLOGY STRATEGY

EXHIBIT 3

*.iq:*tntc**#

Getting rid of tape noise is a prime function of the now-famous Dolby@ System of noise reduction, which in its profes-sional version is in use in virtual ly every major recording studioin the world.s We became interested in the Dolby System notonly because it helps rid even the best conventional taperecordings of background noise, but because it had evengreater possibi l i t ies when applied to low-speed home taperecording. Home recording at 3 3/4 and 1 7/B ips has beenplagued by the problem of really excessive tape hiss-whichmanufacturers have chosen either to tolerate or to "reduce" bygiving up lrequency and dynamic range in recording at thosespeeds. The Dolby System makes it possible to remove thatproblem and get first-class performance at the low speeds bestsuited, from the standpoint both of economy dnd convenience,to home recording.

So we designed a product that would make the Dolby Sys-tem available-in a version designed by Dolby Laboratories ex-clusively for home recording and prerecorded tapes-for usewith any good tape recorder. The product was our Model 100Noise Reduction Unit, a f lexible and effect ive piece of equip-ment that can make any recorder sound better and can do won-ders in opening up the world of low-speed recording to thenome user.

The Model 100 combines the Dolby System with a record-ing control system that supersedes a recorder's own and pro-vides a recording accuracy and simplici ty seldom seen in hometape equipment. One crucial advantage of that control system,which provides separate input level controls (with input-mixing)anda master record-level control, is that it gets stereo record-ing balance r ight and does so easi ly. lmproper balance, almostguaranteed with many tape recorders, is the chief reason forrecordings (on even the best recorders) that don't sound likethe original. l t is, in other words, the chief reason for many peo-ple's dissatisfaction with their recorders.

The Model 100, at $250, is a required investment for any-one who takes recording very seriously and measures theresults cr i t ical ly. But since some people won't need i istremendous f lexibi l i ty, we also decided to offer the Model101-which, at $125, provides identical performance at halfthe prrce. To make that possible, we omitted the input-mixingprovided with the Model 100, supplied sl ightly less f lexiblerecording controls ( i t takes a bit longer to get stereo balancejust r ight), and provided one Dolby circuit per channel in-stead of two. (As in the professional studio Dolby System,you switch the Model 101's iwo circuits to function f irst forstereo recording and then for stereo playback, but not forboth at the same t ime.) The result, again, was per{ormanceidentical to ihe more elaborate unit, at a price that makessense for serious recordists on t ight budgets'

s"Dolby" is a trademark of Dolby Laboratories. "Crolyn" is a trademarkof Du Pont.

While designing the Noise Reduction Units, we became in-terested in what the Dolby System and other factors might dofor a kind of tape recording that no one was taking seriouslyenough. The result was:THE ADVENTTAPE DECK (MODEL 2OO)We had known before, and confirmed in our work on the Model100, that tape hiss was the underlying reason for the compro-mised, AM-radio kind of sound quality that people had come toassociate with cassette recording. Because the hiss was pres-ent in a quantity that made wide-range recording unpleasant tolisten to on cassettes, it had effectively set an upper limit onquality-giving manufacturers little incentive to optimize anyas-pect of cassette recording, including mechanical pedormance.

We realized that once you used the Dolby System to get ridof the noise, you would then have reason to go on to improveall the performance areas that nobody was really attending to'So, to show just how good cassette recording could be, we op-timrzed everything we could around a good cassette transport,added our Noise Reduction Unit, and held a demonstrat ion forthe press. The reaction, even though we couldn't demonstrateeverything we wanted to in a rigged{ogether unit, was that wehad proved that cassette performance could be as good as,and in some ways better than, the standard for records.

In the meantime, we worked on our own cassette recorder-which was to include not only the Dolby System and the neces-sary improvements in all areas of performance, but also themeans, not given to our knowledge with any previous cassetterecorder, to make really superb recordings.That meant effectiveand precise controls for setting balance and recording levels, in-cluding a VU meter that read both stereo channels simultane-ously and indicated the louder of the two at a given moment.

We fel i that cal l ing the result ing tape machine a cassetterecorder wouldn't ful ly indicate our convict ion that i t wasprobably the single best choice among ai l kinds of recordersfor most serious l isteners who want to tape records andbroadcasts. So we cal led i t The Advent Tape Deck (Model200) and let i ts being a cassette machine speak for i tself ' At$260. i t is a new kind of tape machine that we hope wil l provethe key, given "Dolbyized" commercial cassette releases, tomaking cassettes the medium most serious l isteners preferfor most l istening"

About midway in our development of The Advent TapeDeck, we became convinced that the Dolby System's contribu-tion to performance would become even greater if it were com-bined with the use of DuPont's chromium-dioxide tape in cas-settes. Lots of people had been talking about DuPont's "Crolyni'but nobody had hard facts on what it could do in cassetterecordings.s So we got samples, experimented with its charac-teristics, and were convinced that we had to supply a means touse it on our recorder. That meant a special switch on The Ad-vent Tape Deck to provide the right recording and playbackcharacteristics (a good bit different from those of other tape for-mulations) for its use. lt also meant another product:

EXHIBIT 3. ; . " . . " , ; " " . " f "

" . i' . ' : t : : r " ; t l r . : ; " . , . :

ADVOCATE CROLYN TAPEAlthough DuPont's Crolyn tape was being used extensively in criti-cal video recording applications, and justifying its advance press no-tices, no one had made the leap to marketing it for audio purposesfor home use.We decided to do so because we felt that Crolyn wasnecessary for the very best in potential cassette peformance.

We are, then, marketing Crolyn tape under the "Advocate,'brand in cassettes. One of our hopes in doing so is to get oth-ers to market chromium-dioxide tape as well .

There is no doubt in our mind that i t 's worth the trouble.Chromium dioxide has the abi l i ty to put greater high{requencyenergy on tape than other oxide formulations, and is also in-creasingly sensit ive as frequency goes up"Those are ideal char-acteristics for cassette recording, making posslble a still greatersignal{o-noise rat io in conjunction with the Dolby System andbetter overall highJrequency pedormance than any other tapewe know of.

DISTINCTIVE TECHNOLOGICAL COMPETENCES AND CAPABILITIES 55

THE ADVENT PACKETAt this writing, we can't predict exactly what product is going to fol-low Advocate Crolyn tape. As you probably have noled by now, wedevelop products in what might be thought of as organic style, let-ting each product stand on its own. We don't sit down and decideto manufacture a "line" of speakers or amplif iers or tape recorders.

We are into other things at this point, and hope that they wil lbe f irm enough to talk about soon" In the meantime, we inviteyou to write us at the address below for any information youwould l ike, including a l ist of Advent dealers.

lf you like, ask for "The Advent Packe|'That will brrng youeverything we have on al l of our products, and wil l also-unlessyou specify otherwise-put you in jeopardy of getting future in-formational mail ings from us.

So much for the first year.

rAdvent Corporalion, 377 Putnam Ave., Cambridge, Mass. 02139.

ilrurer trcnds and to respond quickly in a dynamicnarkctplace. Henry Kloss had been able to achieve.irnilar success during the init ial l i fe of Advent. Mr.Kltiss was unable to explain why Advent had suc-;eeded in accomplishing responses to market needs in.,dvance of other companies in the industry. He dis--Llssed this phenomenon at some length during con-.clsations with the case researchers in his president's,I ' t lce. a room that was bewilderingly cluttered with all., )rt\ of electronic gear. His desk was laden with trade

\Lrrnals and other papers reporting the current devel-rnrents in home electronics. Only a few feet fiom his

r;':k was the door that led to the R&D section. which.i r\ nevel' Seen Closed.

\ l r K lossPelhaps a recent example will highlight what I mean. Du

Pont Cornpany. which is really not concerned with products.,t all, I rrcan, their basic formulations are raw materials orrrocesses to make raw materials, recently developed a way,i making a material which is simply a process kind of

:ring. That was chromium dioxide, which can be used in the::anuf'acture of magnetic tape and which results in a really,uite important product. But Du Pont stopped short veryr'irlv in the process. They'11 sell you al1 the chromium diox-:le vor"L want. But their involvement with the resulting prod-,..-t (Crolyn tape) was absolutely nil. A lot of time was lost.rtil Advent recognized the product and did something

They (Du Pont) had no market lbr it at all. And they..:e extremely grateful to us tbr it now. I really didn't think., :i_u company could be so pleasant to work with.

CasewriterAre you suggesting that product innovation is primarily

characterized by observation that a need or a market existsfor that product and then going after it, after that specificproduct?

Mr. KktssYes. And from the process innovation, which is a new

way of making sorrething, or some new combination ofthings. Often a new process could have a connection with anew product, but it doesn't tell.

All of oar working has been backwards from the person.Others work hard to find a physical phenomenon, or to de-velop a new bearing, and then work hard to find a market.This is to work completely in isolation, with no connectionto the product at all.

Nobody asked at Du Pont, "In what way can this newprocess make a higher quality result?" At the same time, wewere asking, "In what way can this be used irrespective ofpresently established systems of using tape-what are the lim-itations inherent within this tape on its ability to produce musicfor the listener at home?" And we found that it had a distinctand strong advantage, and this has not even been done by theDu Pont people. You know, it's really hard to believe! I'm notflying to boost Advent, or knock Du Pont, but their detachmentfrom this thing in terms of people was absolutely complete !

Exemplifying the kind of reasoning that went on atAdvent prior to a product decision, Mr. Kloss men-tioned the following incident:

Somebody came around the other day with a way of makinga very high powered amplifier that requires only a very

56 pnnr rwo: DESIGN AND EVoLUTToN oF TEcHNoLocY STRATEGY

small size and bulk. Any normal amplifier wastes up to halfits power at any one moment in heat loss. There is a way ofmaking an amplifier, which we've known fbr some time,that is 97 percent efficient-you waste almost no power inthe amplifier itself. Now since the size of the amplifier islargely determined by the need to dissipate power, clearlythe size here could be reduced. One has known it can bedone; it's called Class D circuitry. This size might make pos-sible a whole new class of things; whether we do this in ayear or so is uncertain. But it's a possible kind of thing,which we didn't go to invent, and which has been around foryears and years and years, but which might become practi-cal to do, if you do the rest of the things to get all the meritout of it, such as creating a small power supply and all,which calls for minor invention on our pafi. We've had afeeling that exceedingly small kinds of things were worth-while; when something like this comes up, you notice itmore sharply than somebody else, who looks atit only asjust a cheaper way of getting a high-power amplifier.

Formal market research at Advent Corporation wasnever mentioned. Mr. Kloss had the following remarksto offer when the case researchers asked him about it:

Mr. KlossOh ! One never does market research ! The only test of the

market that there will ever be is to fully commit to a productitself; one is never going to make any test marketing or anyasking of anything. And it will be done whenever it's theproduct that will most certainly, most quickly, give a certainamount of money here. lt's just a matter of priority of prod-ncts; one could, within a couple of months' time, make anoise reduction unit and turn it into a product and sell it.That had to be done first.

Casew riterBut with all due respect, you must feel that it will go, that

when people see it, they're going to buy it?

Mr. KlossWell, yes. But there's no way of proving this before you

spend the money to produce it, that I know of.

CasewriterExperience and intuition tell you that it will go?

Mr. KlossThis is about, yes, all that one has. Experience that my in-

tuition has been right gives me a Iittle more confidence, maybe.

THE DOLBYIZED CASSETTE RECORDER

Critical to Advent's recovery from unprofitable devel-opment operations was the successful manufactureand marketing of the Dolbyized cassette recorder (Ad-vent Tape Deck M200), described briefly in Exhibit 3.The way the idea of noise reduction recording became

a product for Advent, and at just the right time, is in-dicative of the whole Advent innovation process.

Mr. Kloss had noted very early in the company'shistory that it was possible, in theory, to do somethinglike noise reduction. That is, he noted that at any mo-ment in the recording process, the normal recordingmethods from basic information theory resulted ingreat waste. He noted that there ought to be some wayof continuously optimizing the recording technique.However, his investigation stopped there. He knew itwas possible, but he did not embark then and thereupon a process of invention. Instead, Mr. Kloss be-came sensitized to noticing if somebody else had re-ally done it. A11 of the Advent products began in fa-miliar fashion. Mr. Kloss commented,

The things that I have done have never started fromnoticing something was important and then working back-wards to the fundamental way to do it. You know, "Gee, itwould really be desirable to have instant photographs," andthen work hard to do it. I don't know if that's what Land didor not. But that has never been our particular way of doingthings. A11 of the work has been to think about things thatwould be desirable to do, and then be continuously lookingaround to see what things are possible to do, perhaps withminor invention on our part, which would satisfy a per-ceived need in the market and begin to define a product.Only when the need in the marketplace simultaneouslymatches the knowledge of the technology does one spendmore than a f'ew minutes thinking about it.

. . . So any product I think of for longer than a f'ew min-utes is already one that I know can be made. . . . You want toconstantly have in mind, stored with very short access time,the different technologies. You sort of somehow keep awareof what kind of things can be done. When several of thesecome together to folm a product, that can result in your de-ciding to make that product. You have to have, at any mo-ment, a moderate-sized number of floating possibilities ofthings that you can do.

But there's a cost to this floating process of having allthese pieces of information available which makes it veryhard to expand to a large group ofpeople.

In 1967, Mr. Kloss heard about Ray Dolby, a manwho had been making professional noise reductionsystems in England and was just starting to sell themin the United States. That was just at the conclusion ofMr. Kloss's presidency at KLH. He negotiated anagreement between Dolby and KLH for KLH to havethe rights to incorporate that system in a tape deck. Mr.Kloss agreed to manufacture that tape deck for KLH,to help KLH introduce the Dolby system to the world.

For many reasons, the product, which was envi-sioned as a $600 reel-to-reel machine with Dolby cir-

DISTINCTIVE TECHNOLOGICAL COMPETENCES AND CAPABILITIES 57

EXHIBIT 4 How the Dolby System Works.

Very loudsrgnal(0 vu)

l\,4oderatesignal(-20 vu)

Very softs ignal(-40 vu)

1. The slgnal berng recorded passes through the record Dolbycircuit tlfsf. The Dolby circuit operates on the higher (,,hiss,,)frequencies in a predetermined manner, depending on theiroudness level. The loudest signals (Ovu) pass unaffected:hrough the circuit . Signals of moderate intensity (_20vu) arecoosted moderately, while the very soft signals (-40vu) receive-naximum boost.2 After being thus "Dolbyized j,the signal is recorded onto the tape.: is at this point that tape hiss makes its appearance. you can seern the diagram how the record Dolby circuit,s action has made thecr,v-level signal louder than usual, relative to the tape hiss.

Juitry, never got made. By May 1969, Mr. Kloss per_.onally had suffered a loss of $265,000, largely:hrough design and producrion problems. At that time.\dvent began manufacturing the Advent loudspeaker.tr support further development work on the large_..reen television. Simultaneously, KLH had renegoti_-:ted a manufacturing contract with a Japanese firm,\akamichi, to build a $250 reel_to,reel machine withDolby circuitry. Such a product was on_line by the fall: 1969, when Nakamichi offered KLH a similar deal:r a cassette recorder with Dolby circuitry. Mr. Kloss

::scribed the events that followed:Even though KLH had a selling reel_to_reel machine

tt ith Dolby, they decided not to make the cassette machine.There were many reasons for this; they were having trouble\\ ith the Nakamichi machine they had, they had had grossrrouble with my deck, and they had just gotten a new presr-Jent who was against expansionist moves. So they justbacked off the whole thing, just when the right product was:here. Advent's contribution to the process was really arloating knowledge of the benefits of chromium dioxide

3- On playback, the signal from the tape is passed through theplayback Dolby circuit , which is an exact,,mirror_imaqe', of therecord Dolby circuit. The playback Dolby lowers the f reviouslyboosted parts of the signal, by precisely the same amount theyhad been boosted. The tape hiss-which made its appearancebetween the record and playback halves of the Dolby System_is automatically lowered at the same time by a very iubstantialamount, effect ively 100 db, or 90 percent. At the same t ime,because of the precise ,,mirror- image', playback action, theDolby System causes no other change in the signal relat ive tothe original source that was recorded.

tape, the Dolby circuit, and a manufacturer of heads whoknew about Dolby. It was gathering these things togetherrnto a product and bringing them to people,s attention thatAdvent accomplished.

Within hours, before the Nakamichi representativeshad returned to Japan, Mr. Kloss had negotiated anagreement granting Advent the productive capacity toemploy Nakamichi heads in an Advent deck. TheDolby system it uses is described in Exhibit 4. Whilethe new product received numerous adulations in thepress, by October 1970 Mr. Kloss felt that rhe primaryshift toward central cassette recording that he had ex_pected with the marketing of the Advent Tape Deckwas not occurring as fast as he had hoped. He felt thatthe primary reason for this deficiency was the inherentdifficulty of depending on a dealer orsanization topush Advent products that incorporated iophisticatedinnovations, features that had to be understood by theconsumer before he made the logical choice of an Ad-vent product. Consequently, he and Mr. pressman

58 pnnr rwo: DESTGN AND EVoLUTToN oF TEcHNoLocy STRATEGY

were spending considerable time in attempting to finda solution to this problem, the final step in completingthe innovation of the Dolbyized recorder.

TELEVISIONAlthough Mr. Kloss had suspended formal develop-ment work on Advent's large-screen color televisionset, he continued to make minor modifications to itwhen time was available. Several experimental setsfunctioned without major problems in the Adventplant and homes of employees, but decisions remainedas to the exact design the set would have and the mar-keting approach to be used. Mr. Kloss estimated thatthe first production models would be available for salesix to nine months after the "go" decision was made,and that the decision would be made "whenever it'sthe product that most certainly, most quickly, can givethe right amount of money here."

Describing the product's origins, Kloss said:

I was vaguely interested in TV as an important medium.One reads a magazine article that points out a way to makeprojection television, All you had to do was read that articleand see that it could apply to a screen this size [fbur and one-half feet by six f'eetl. And then you quickly ask the question,Is this worthwhile? You make a guess that it might beworthwhile i l t the r ight price.

In 1964, Kodak announced the development of ascreen which could eff'ectively increase the amount ofperceived reflected light by a factor of five over ordi-nary mat screens. This development suggested that itmight be possible to diffuse light from a projectiontube over aTarger screen of this type and still retainsatisfactory brightness. However, Mr. Kloss said thathe would have built a high-quality television set evenif the large screen had not been possible.

Ifthere never was a big screen, we'd be in television anywaybecause you can do a high-quality small set. So our interestin TV is not restricted to the big screen, though it's muchmore fun because there's no comparison available.

Mr. Kloss believed he could discem in color TV thetypical product life cycle of consumer electronics prod-ucts working to the advantage of new producers withsufficient marketing skill. During the late 1950s andearly 1960s, color TV quality improved as bugs wereworked out of it, but by 1966 short-cut production meth-ods were reducing overall quality. Mr. Kloss observed:

NTSC [National Television Standards Committee] stan-dards permit a very high quality to be broadcast which is

usually badly degraded by a set at home. What you see on aregular picture is not what you would see on a really highquality set.

Evaluation of demand, though not verbalized, sug-gested to Mr. Kloss that larger-screen TV was an in-herently desirable thing. The evaluation was not, hesaid, an extrapolation of the popularity of largerscreens in ordinary television sets. Nor could he iso-late any one other factor which dominated his evalua-tion except that it was the kind of thing he would liketo have in his home. There was no way to extrapolatefrom sales of expensive large-screen sets. He said:

There is absolutely no experience on large-screen televisionfor consumer use. . . . Yes, I feel that large-screen TV will bepopular but there's no way to prove this until you spend themoney to produce it, that I know of.

A lot of people go to the flicks. The whole business is tobring things up close, large, and important. . . . This is doingthat and there's that kind of rightness about it. That's aboutthe only defense one has. Itjust doesn't have any connectionwith television as one thinks about it. Once you say televi-sion, somebody brings to mind almost repugnant kinds ofimages. They don't do it for books though. You talk aboutbooks and they think about great books and the Universityof Chicago, and this kind of thing. They don't think aboutthe kinds of things they sell down on Washington Street.

. . . And for big screens, there's no expressed desire foranybody to want a big screen. . . .

Exactly what's happening out in the store, where peopleare expressing what they want, sure I get some informationon that from somebody else. But this sort of shapes the endfeatures of products. People are not out there expressing anew kind of thing that they would Iike to have-a compacterfor kitchen garbage: I've never heard anybody say that theyever wanted something like this. I think maybe some peopledo; we'll see. . . . The kinds of products that people mightwant are not limited to what people have said they want orwhat people, when you knock on their door, say that theywill want. In the first case, it's too late if people express thedesire for what they want. In the second case, the answersare invalid when you ask about it.

Development

Shortly after organizing Advent Corporation in May196l,Ml Kloss began working on the television set.Though he was confident that the idea was technicallyfeasible, there were many questions yet to be an-swered regarding design. For example:

The way of finishing mirrors at a very low cost-it's beenused in the eyeglass industry; it's not used in making lenses;it's not used in telescopic work. But the technology to makeverv low cost kinds of mirrors exists in the trade. And we

sort of know that technology is there and go and use it. If ithad required oLrr fincling a very low cost way of making alens which hadn't been developed yet, I woLrld have cut outfiom any of our consideration the making of a low-cost pro-jection television. . . . It maybe would have been a very iir,rit-ful investigation, but it would have been the kincl of thing forwhich you couldn't be absolutely ccrtain of finding an an-swer. We've always avoided the kind of investigation wherethe answer had some reasonable chance of being negative.

The major cost in operating the Advent large-\.reen TV was expected to be cathode-ray tube re-rlacement. Phosphor life (and therefbre tube life) wasi \pected to l ie between 700 to 2,500 playing hours.The projection tube had been used in some of the ear-,iest television sets, but the large screen desired wouldrut new demands on it fbr maximizing total light out-:ut. Thus, an RCA commercial projection system with::le mirror and corrector lens outside the tube was re-':cted as too inefficient and troublesome.

Rights to produce the Kodak screen had been given. r Advent with no guarantee of the practicality of do-:ig so in a large size. It was concave toward the audi-:1.e and leaned forward slightly. These two factors re-- lired that the screen extend about a foot out from a: ,rmal wall. Brightness fell off rapidly as the viewer-.oved about 70' off an axis perpendicular to the

'-:e en. While satisfactory viewing required the roombe no brighter than would be required to read a

- r'.\ spaper with strain, a bright light could be situated. rhe side of the screen without seriously degrading-.: image. Mr. Kloss believed the Kodak screen was: best presently available, but hoped to develop a

:- 'prietary flat screen which could be patented. Ituld be composed of many elements which would

---h direct l ight in the optical direction.

EXHIBIT 5 ProjectionTelevisionTube.

DISTINCTIVE TECHNOLOGICAL COMPETENCES AND CAPABITITIES 59

Projectedimage

Spherical corrector lens

In a conventional color receiver, the electronics as-sembly feeds information to a single picture tubewhich contains three electron guns. The Advent sys-tem was based on similar electronic circuitry, but thevideo image was projected on the screen by three sep-arate cathode-ray tubes, one each for the red, green,and blue color constituents. The Advent tube is dia-gramed in Exhibit 5. Within each tube, a stream ofelectrons of varying intensity was beamed toward thepositively charged internal anode, coated with a phos-phor that generated one of the three colors to be pro-jected. This beam was accelerated, focused, and de-flected in a rapid horizontal scan of l5', with the U.S.standard 525 sweeps for each vertical transit. Thisstream of electrons hitting the anode recreated thetransmitted picture for that color. The internal spheri-cal mirror reflected this image and focused it throughthe corrector lens on the external screen where thethree colors were superimposed.

Tests of experimental models had shown that thissystem, based on three projection tubes with internaloptics, could produce large images of amazingly highquality. Internal optics (mirror and corrector lenswithin the tube) were superior to external optics whichrequired exact positioning of mirrors, greater lightwastage, and attendant problems in keeping the opticsclean. Internal optics had been used by the U.S. Navymany years previously and were not patentable. Mr.Kloss commented, "We may very well have been in er-ror in the past in not getting some nominal patents tomake it easier to sit down with somebody and sellsome of this technology." He did not feel that protec-tion was the primary value in patents "because the re-luctance of manufacturers to get into any new field isreally quite surprising. It's unfamiliar, sort of strange;

60 pnnrrwo: DESTGN AND EVoLUTToN oFTEcHNoLocy sTRATEGv

they would like to buy it. We wouldn't mind, but it'salways a mess to do manufacturing for someone else."

CompetitionThere were no large-screen TV sets on the marketwhich would compete directly with the Advent set inthe home market. The Eidophore system, developed inSwitzerland in the early 1950s, used an electron beamphysically to change the surface of an oil film. A lightprojected through this film and onto a screen provideda much brighter and larger picture. The Eidophore set,however, required an operating technician and costabout 1i40,000 for a monochrome version and over$100,000 for color. General Electric had produced amodified version which was more easily operated andcost about $29,000 in monochrome and $38,000 incolor. People who had seen this set r6ported to Mr.Kloss that its brightness and resolution were inferiorto Advent's, though he f'elt thart improvement might beobttiined by using a higher gain screen.

Very little ofthe current discussion in tradejournalsabout future trends in television centered on largescreens. More was aimed at miniaturized TV or at de-velopment of a flat screen which could be installed ina wall. Mr. Kloss commented thert "there might be amessage there. You talk about desirable things of thefuture; nobody talks erbout larger screen television atall." During 1968, Sony Corporation demonstrated anexperimental set which was flat and large (eight feetdiagonally). This set was essentially a board of 26,000elements of one red, one blue, and one green lighteach. This compared with 350,000 elements of phos-phor in the typical shadow mask tube and resulted in apicture of noticeably poor resolution. The problems tobe solved were to decrease the size of individual lightsand obtain more rapid switching of the lights. Whilemany years of development work remained before thisset could be competitive, Mr. Kloss felt that the ulti-mate and best TV of the future would in some waygenerate light on the screen itself.

Although projection television was well recognizedin the industry as a means of obtaining both a large andflat screen, the immediate objection was that it couldnot be made bright enough for viewing in a lightedroom. Several large companies had experimented withit, nonetheless. Mr. Kloss described one such effort inexplaining why the large manufacturers were unlikelyto provide competition soon after he began production.A large military and consumer electronics firm hadshown him a cathode-ray tube under development forprojection use. A configuration of optics very similar to

Advent's had been adopted, but a maximum falloff inbrightness at the edges ofthe screen of 10 percent to 20percent had been specified by someone. Conventionalknowledge of human eye sensitivity would suggest thathumans would be insensitive to falloffs of 200 percentto 300 percent. However, this error caused engineers todesign an aspherical corrector lens which would dis-perse light nearly perfectly on the screen and cost manythousands of dollars. Similar mistakes eventuallycaused the system to reach a height of nearly six feetand to require a sealed refrigeration unit for cooling.RCA had estimated about a year earlier that it could de-velop a large-screen TV within several years for from$5 million to $50 million (the exact figure was not re-called). Mr. Kloss believed that a radically improvedsystem could not be designed and built within 5 yearsand more likely 10 years. Competitive projection sys-tems would probably require two years minimum afterthe Advent set was introduced.

Production and GostsProduction was expected to be carried out in Advent'snew 64,000-square-foot plant. Receiver units were thesame as those required in ordinary sets except that lessdeflection power was needed due to the decreased de-flection angle. No decision had yet been made whetherto make or buy the receiver units. Projection tubeswere expected to cost about $50 each produced on asmall scale and involved no unusual technology. Someequipment had already been purchased to produce testmodels. The cost could probably be reduced to $100for a set of three tubes on an automated line. Produc-tion of the screen involved handwork to sketch andmold a thin aluminum foil, apply backing, and con-struct a frame and stand.

Mr. Kloss did not envision a highly automated line.He believed from experience at KLH and AcousticsResearch that cost penalties would be only 10 percentto 20 percent if as few as 100 sets a week were pro-duced. Electronic components were priced the same toall buyers if ordered in quantities over approximately1,000, and the inflexibility and high fixed costs of anautomated line would prevent great economies ofscale. Tooling costs for a line adequate for 100 sets perweek would be "many tens of thousands of dollars."Production costs were expected to be similar to thosefor other Advent products, with direct labor costingabout one half as much as materials. Mr. Kloss be-lieved that production costs of shadow mask tubeswere about $100 and far outweighed cabinet and re-ceiving equipment costs.

Concessions were made to simplify design, andproduction of the Advent set included replacement ofelectrostatic focusing with the less common and moreexpensive static magnetic focusing. This decisionwould result in a selling price about $200 higher thanit would otherwise be. Similar concessions were ex-pected in screen design.

Distribution and MarketingMr. Kloss believed that most of the expected technicalproblems which could become customer complaintshad been effectively ironed out of the TV design. Het'elt that sales personnel could cause complaints, how-ever, by creating or allowing unreasonable expecta-tions. He said that "the expected kinds of troubles areIhat we just haven't anticipated sorqebody's attitudetoward this or his expectations. This comes from ratherrecent learning in noise reduction systems where youiravc a difficult time explaining to someone."

Although the set would eventually be designed fbrinstallation by the customer, the first installationsi rorr ld leqrr i rc a tcchnic ian:

It wil l be exactly equivalent to what the early color sets hiidrvith technicians running around. . . . The whole thing wasrnechanically liagile and fussy. . . . The beginning of anynew kind of thing is troublesome. You can't even tell howvou finally want to nakc it r-rntil yor-r go through thrs manu-1lctr.rring process.

Retail price had originally been estimated at lBl,500ro 52,000, but had been revised upward to $2,000 to:1.500 based upon estimated costs and normal rnargins.

Mr. Kloss expected to engage in enough advertising.tr iclentify the prodr,rct in consumer minds as reason--'hlv priced and to lock in a portion of the market. The,)nly scheme he had which might help lock in the con-.unrer was to give the product a simple name and thenr()t change it. He would "never engage in what mightrre inlerpreted as an annual model change." He felt that.ri\ strategy had given KLH an advantage over other-on.)llanies which introduced new products and conse-,:uently destroyed their equity in the name.

Mr. Pressman, marketing vice president of Advent,-.ricl he had purposely avoided having his attention di-,:rted by the TV, which was still at least several:rLrnths from introductions. He did f'eel that video::'oducts were exciting and had a greater long-range..'.rtential for Advent than audio did. He thought, as,.: l l . that 5,000 unit sales a year sounded possible.

lnough attempts by other video product manufactur-::-r to distribute through audio dealers had proven un-

DISTINCTIVE TECHNOLOGICAL COMPETENCES AND CAPAB ICS 6I

successful, he had not eliminated the possibility of try-ing it again. No opinions regarding advertising andpromotional strategies had been formed.

When the Advent large-screen television was con-ceived, Mr. Kloss envisioned its use in the home as ahigh-quality display medium and believed that the in-creasing quantity of broadcast materials would lead toproportionally increased quality programs for which alarge screen would be preferred. Mdeo tape recordingunits being brought out by several manufacturers wouldpermit quality programs to be recorded or purchased,which might encourage more intensive viewing of pro-grams at convenient times on a unit like the Advent TV.However, recorders would have to have sufficient capa-bility to reproduce most of the information content ofthe signal broadcast so that playback on a large screenwould be of adequate quality. Mr. Kloss had no imme-diate plans to produce complementary products exceptthe improved screen, though he did wish to broaden Ad-vent's product line over the long term.

The possibility of selling the television set to an-other company was not considered:

If a product that I developed and sold to somebody else didnot succeed, I would be free to blarne somebody else. Andthat's an unsatislactory position. I have to have the completeresponsibility. I really, honestly wouldn't know whether itwas their fault or r-nine; so I have no way of knowingwhether I've done anything worthwhile or not if I don't havecomplete knowledge of the total process. So to me it wouldbe very unsatisfactory to invent things and sell them tosomebody. If they continLrally and regulally were success-ful, I'd, after a period of tiIrre, be satisfied . . . with my con-tr ibution. This probably wouldn't happen.

THE FUTURE

Despite several problems with Advent that were ap-parent in late 1970, the company's future promised tobe an exciting one. Mr. Kloss especially looked for-ward toward making the decisions necessary to reachhis stated sales goal, a level of sales which he felt con-fident of reaching. Specifically, Mr. Kloss felt that a$50 million sales level could be reached within the$2.25 billion audio equipment market and the $2.5 bil-lion television market, without sacrificing Advent'spolicy of operating within a specialized and protectedmarket niche. Beyond that point, however, it was un-certain whether such a position could be maintained.Mr. Kloss commented:

If one grows in an established market area, then there can bea succession of products that are based on a careful and sen-

62 pnnr rwo: DESTGN AND EVoLUTToN oF TEcHNoLocy sTRATEGv

sitive reading of what people in the marketplace express thatthey want, and what competent engineering can produce,and this may well be an important part of Advent's fu-ture. . . . I've no objection to growing in the regular kind ofway, and that's the kind of thing that can be happily dele-gated to somebody else. In fact, to delegate enough of thatto make a strong, growing company, and yet continue in thecompany, would be highly desirable. How strong you haveto be before you can have the luxury of doing "me too"kinds of products, though, I don't know.

I think a perfectly honorable way is to continue to growmaking products which, on the strength of the market posi-tion, are salable. . . . Up until now one has restricted one'sattention to things which are fundamentally better and dif-ferent than anything else. But there is nothing wrong withgrowing doing ordinary kinds of products. . . . The idea ofmaking products which continually add to the volume ofAdvent may well be completely done by solReone else. I'dbe happy to have that done. That would leave me lncreas-ingly free to think longer about things which were differentin kind, new kinds ofproducts.

There's an ideological inclination to want to makebroad-spectrum kinds ofproducts. The interest is to get backto where one was at KLH. The cassette recorder with Dolby,I envision that as not nearly as broad-spectrum at the pres-ent time as it was planned to be. All the ploducts that wouldgrow out of the fact of the cassette being the primary musiclistening medium for a lot of people in the home, this isn'thappening so fast.

One issue of great concern to Mr. Kloss was the in-stitutionalization of the Advent innovation process. Onthe one hand, Mr. Kloss felt it would be possible to finda full-time administrator who could work closely withhim in handling the company's growing managementresponsibilities, while he could continue to devote hismajor efforts to the very enjoyable work of conceivingnew products and staying abreast of consumer electron-ics technology. On the other hand, Mr. Kloss felt that itwas possible to institutionalize the product conceptionfunction, but he was unsure how best to proceed. In thecuffent situation, he personally perceived market needs,was able to match those needs with the technologicalstate of the afi, and was further capable of completingthe product conception that fulfilled the market-technol-ogy match. As the company grew, Mr. Kloss recognizedthat some division of these functions would have to takeplace. Should he separate the more routine R&D func-tions from the esoteric, or should he attempt to pool theefforts of a large number of people in order to anive atan effective product conception function? In late 1970,Mr. Kloss could not see how the latter plan might work.

Concerning his role as Advent grew, Mr. Klossmentioned his admiration for the situation Edwin

Land was reputed to have at Polaroid, namely, the sit-uation of ready access to any level of R&D. Mr. Klosscommented: "To contribute to it or direct it without in-terfering with its normal process. That to me is a reallyvery desirable kind of thing. And it can't frequently beachieved." Mr. Kloss felt that he might be on the waytoward such a situation already, toward an Advent thatcould carry on, increasing a bit in his absence, but towhich he could contribute substantiallv.

h{*l;''l tr* l}ffit 3r'}#ifllr'**ii*ff'r iru{st{}*lrffi*r*{lr il$f**l*Int;Alan R. Fusfeld

Every executive knows of cotporate successes in whichtechnology has played a dominant role. Almost every-one in venture capital and entrepreneurship has a per-sonal list of these successes to emulate. Dreams of tech-nology turned to profit are nuftured by real-lifesuccess-Intel Corporation, Minnesota Mining andManufacturing (3M), Polaroid, Hewlett-Packard, andDigital Equipment Corporation, to name a f'ew of many.

Despite the obvious role of technology in superla-tively successful enterprises, technological issues onlyoccasionally are included explicitly in typical corporatestrategy reviews, and only rarely are they among theregular inputs to corporate planning and development.

TECHNOLOGY THE UNDERUTILIZED INPUTTO PLANNING

Most executives have limited management experiencewith technology. They see research and developmentas a black box: money and manpower resources areput in, but what should come out? How should theseresources be directed and managed? And what shouldbe the characteristic delays, success rates, and mana-gerial control variables? General business manage-ment lacks an intuitive feel for strategically directingand positioning research and development invest-ments as compared with similar investments in mar-keting, sales, and manufacturing. The result is thattechnology issues tend to be downgraded in overall

Reprinted with permission fromTechnology Review, MIT, Alumni As-sociation, copyright O 1978. Al1 rights reserved.